What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-04 compared with 2022-07-01 · 261 added, 224 removed, 397 unchanged (55% of the section changed)

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The most important factors that could cause actual results to differ materially from those anticipated by our forward-looking statements include, but are not limited to:

an extended slowdown in the real estate markets in which we have significant homebuilding activity, including a slowdown in either the market for single family homes or the multifamily rental market;

an extended slowdown in some or all of the real estate markets in which we have significant homebuilding activity, including a slowdown in either the market for single family homes or the multifamily rental market;

changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit;

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the impact of inflation or a higher interest rate environment;

the effect of increased interest rates with regard to borrowings by the funds we manage on the willingness of those funds to invest in new projects;

the potential negative impact to our business of the ongoing coronavirus (“COVID-19”) pandemic, the duration, impact and severity of which is highly uncertain;

continuation of supply shortages and increased costs related to construction materials and labor;

supply shortages and increased costs related to construction materials and labor;

cost increases related to real estate taxes and insurance;

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government actions or other factors that might force us to terminate our program of repurchasing our stock;

a decline in the

value of our land inventories and resulting write-downs of the carrying value of our real estate assets;

a decline in the value of our land inventories and resulting write-downs of the carrying value of our real estate assets;

the failure of the participants in various joint ventures to honor their commitments;

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natural disasters and other unforeseen events for which our insurance does not provide adequate coverage;

or regulatory changes that adversely affect the profitability of our businesses;

new laws or regulatory changes that adversely affect the profitability of our businesses;

our inability to refinance our debt on terms that are as favorable as our current arrangements;

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We undertake no obligation, other than those imposed by securities laws, to publicly revise any forward-looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events.

Our second quarter results demonstrated strength and excellent performance throughout the quarter.

However, the weight of a rapid doubling of interest rates over six months, together with accelerated price appreciation, began to drive buyers in many markets to pause and reconsider.

We began to see these effects after quarter end.

Despite the pause, demand remains reasonably strong as household formation has continued to rise and buyers still have down payments and are able to qualify for mortgages.

Buyers are seeking shelter and protection against inflationary pressures as scarcity of rentals drives rents higher.

Owning a home with a fixed rate mortgage provides protection against annual or biennial rent increases.

Although we have adjusted downward prices in some markets, even those prices remain higher than a year ago.

Supply remains limited across the country and the need for affordable workforce housing continues to be at crisis levels.

Production must catch up to the growing household numbers as production of dwellings over the past decade has lagged prior decades by as many as five million homes.

Although market conditions in some markets are no longer as positive as they had been, indicators that this would happen have been building since the Federal Reserve's tightening began.

Given the Federal Reserve's expressed commitment to combat inflation, we can expect continued market tightening until inflation subsides.

We are focused on making the changes that are necessary to stay ahead of the trend.

So far in June, new orders and traffic have weakened in many of our markets due to a rapid spike in mortgage rates and headwinds from negative economic headlines.

Many markets have also slowed because we have entered the seasonably slower part of the year.

We had excellent third quarter results as we continued to drive strong closings and performance, which continues to enhance our positioning in evolving market conditions.

In addition to the well documented supply chain constraints and limited workforce slowing production, housing has now been considerably impacted by the more than doubling of mortgage rates over the past months, and therefore, the increase in monthly payment costs and reduction of affordability.

The housing market has continued to weaken, as expected, in response to the Federal Reserve’s very rapid and aggressive reaction to inflation.

Homebuilding finds itself, once again, at the forefront of all that is happening in the economy, and the Federal Reserve’s use of its interest rate tool to curtail inflation is having the desired effect on the “for sale” housing market.

While the housing market is now adjusting, the Federal Reserve Chair’s recent increases in the fed funds rate, together with an articulated determination to do more, suggests even more challenges ahead.

While demand has cooled high pricing levels, there is still a housing shortage across the country, especially work force housing, and household formation has continued to rise.

Additionally, buyers are still seeking shelter from inflationary pressures on rentals, as scarce rentals and increased demand from those who would otherwise purchase, drive and keep rents higher.

To maintain sales momentum, we have offered mortgage buy down programs and increased sales incentives.

We have adjusted prices in various communities to the levels that are necessary to maintain reasonable sales volumes.

Our price reductions have led to sales upticks, which leads us to believe there is still underlying strength in the market.

With respect to our financial services business, the mortgage market has become extraordinarily competitive as refinancings have all but halted and sales of previously owned homes have declined.

As a result, margins on sales of mortgages into the secondary market have been decreasing.

Although deliveries have been constrained by supply chain disruptions and an increase in labor costs, for the first time since the supply disruptions began, we saw a flattening in cycle time - the time it takes us to build a home increased by only five days over the past four months.

This may signal that supply chain problems have peaked.

But it also is because we and our suppliers have become much better at managing supply problems.

The pace at which we are starting new homes has been constrained by delays in getting permits.

We are matching our sales to our starts, rather than trying to match our starts to what we can sell.

During the third quarter and early September, we had nine markets that continued to perform well, 22 markets where we have made significant price adjustments to regain sales momentum and seven markets which reflect a more significant market softening and correction.

We saw a three-day reduction in cycle time, the time it takes us to build a home, in the third quarter from the second quarter.

Although this is minor, it shows that we and our suppliers are making progress controlling supply issues.

Construction labor remains very tight as industry wide high levels of volume for second half deliveries moves through the various stages of construction.

We expect to start seeing an easing in labor as the overall industry reduces the level of construction starts.

We continue to strategically acquire land, primarily through options.

This continues our land-light strategy as our percentage of homesites controlled increased by May 31, 2022 to 62% from 50% in the prior year, while our years’ supply of land owned decreased to 3.1 years as compared to 3.3 years last year.

We are also continuing to pay down debt as it comes due, with the next tranche maturing in November 2022, and we are continuing to repurchase our stock.

Our playbook going forward will be to use our dynamic pricing model week by week to price products to current market conditions in order to maximize pricing and margin while we maintain a carefully limited inventory level.

We continue to sell our homes later in the construction cycle to maximize prices and reduce the likelihood of costs increasing after we commit to sales prices.

We will continue to build and to adjust prices in order to fill the housing shortage and provide much-needed workforce housing across markets.

We will continue to work to improve our SG&A leverage and we expect to drive efficiencies through technology and process improvement to offset market adjustments.

We will continue to focus on cash flow and our bottom line to protect and enhance our already strong balance sheet.

Finally, we expect to conclude our long-planned spin-off by year end.

We have formed a company, named Quarterra Group, In.

(“Quarterra”), which will have three asset management verticals - multifamily residential, single family for rent and land banking and similar land finance strategies.

When it is spun off, Quarterra will remove $2.5 billion of assets from our balance sheet, without materially affecting our earnings.

We believe we are well positioned financially, organizationally and technologically to thrive in this evolving housing market.

We recognize that interest rates are rising and inflation continues to be a significant headwind.

It is difficult to provide the more targeted guidance that we typically offer given the uncertainty about market conditions, so we are providing broader than normal ranges in our guidance for our third quarter.

We expect our new orders for the third quarter of 2022 to be in the range of 16,000 to 18,000 homes, and we anticipate our third quarter deliveries to be in the range of 17,000 to 18,500 homes.

We expect gross margins to be in the range of 28.5% to 29.5, and we expect our SG&A as a percentage of home sale revenues to be between 6.0% and 6.5%.

We believe we are still on track to reach our goal of 2.75 years’ land owned and 65% homesites controlled by year-end.

This continues our land-light strategy as our percentage of homesites controlled increased by August 31, 2022 to 63% from 53% in the prior year, while our years’ supply of land owned decreased to 2.9 years as compared to 3.3 years in the prior year.

We continued to pay down debt without replacement.

As a matter of careful capital allocation this quarter, given the current market conditions, we chose not to repurchase stock in favor of early retirement of debt, however we expect to continue to repurchase stock in the future as opportunities present themselves.

We are focused on our strategy going forward:

• We have adjusted prices in various communities to levels that should/are intended to enable us to maintain reasonable volume.

We will continue to build even as prices adjust, in order to fill the shortfall and provide much needed workforce housing.

• We are working with our trade partners to right size our cost structure to current market conditions.

• We are being extremely selective on new land acquisitions and new communities.

We have re-reviewed and re-underwritten land purchases in our pipeline to reflect current market conditions.

• In sync with selling homes, we will continue to improve our cost of doing business by focusing on and reducing SG&A expenses as a percentage of home sale revenues.

We have seen quarter over quarter improvement in our SG&A over the past years and we expect to drive efficiencies through technology and process improvement to offset market adjustments where possible while we leverage our extraordinary management team across the country.

• We will maintain tight inventory control.

As our growth rate is reduced and as cycle times revert to normal our inventory should shrink, which will generate sizable cash flow.

Our commitment to match production to sales pace should ensure that we will not create standing inventory.

• We will continue to focus on our cash flow and bottom line to protect and enhance our already extraordinary balance sheet.

• In order to carry out our long-planned spin-off, we have formed a company to which we will transfer our subsidiaries that are engaged primarily in creating vehicles for investing in real estate related assets and we are well along the path that will enable us to distribute the stock of that company to our stockholders.

While the market is shifting and adjusting to a new, higher interest rate environment, we believe we are well positioned financially, organizationally and technologically to succeed in these conditions.

We recognize that inflation continues to be a legitimate threat and important parts of the economy are slowing.

We know that the Federal Reserve is determined to curtail inflation, and this will take some time.

But we also believe we know how to adjust as the market changes, and we are making those adjustments.

It continues to be difficult to provide the targeted guidance about our expected future performance that we historically offer given the uncertainty about market conditions, so we are providing very broad ranges to give some boundaries for each of the components of our fourth quarter.

We expect our new orders for the fourth quarter of 2022 to be in the range of 14,000 to 15,500 homes, and we anticipate our fourth quarter deliveries to be in the range of 20,000 to 21,000 homes.

expect gross margins to be in the range of 26.0% to 27.0%, and we expect our SG&A as a percentage of home sale revenues to be between 5.7% and 5.9%.

We expect our fourth quarter ending community count to increase about 5% from the end of the third quarter, and we expect a further increase in 2023, although there are many factors that could cause the expected increase in community count not to occur.

As we look to the remainder of 2022, we recognize that there are challenges in the market to which we must pay careful attention.

But there are also opportunities.

We look forward to meeting the challenges and taking advantage of the opportunities to make Lennar an even stronger company in the future.

We expect that we will meet the challenges and that we will continue to adjust to maximize opportunity and drive us into an ever better future.

(1) Results of Operations

We historically have experienced, and expect to continue to experience, variability in quarterly results.

Our results of operations for the three and six months ended May 31, 2022 are not necessarily indicative of the results to be expected for the full year.

Our results of operations for the three and nine months ended August 31, 2022 are not necessarily indicative of the results to be expected for the full year.

Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second and third fiscal quarters and increased deliveries in the second half of our fiscal year.

However, a variety of factors can alter seasonal patterns.

Our net earnings attributable to Lennar were $1.3 billion, or $4.49 per diluted share ($4.50 per basic share), in the second quarter of 2022, compared to net earnings attributable to Lennar of $831.4 million, or $2.65 per diluted share ($2.66 per basic share), in the second quarter of 2021.

Results included unrealized mark-to-market losses of $78 million in the second quarter of 2022 and unrealized mark-to-market gains of $272.6 million in the second quarter of 2021 on our publicly traded technology investments.

Excluding mark-to-market losses on technology investments in both years and a gain on the sale of our residential solar business in the prior year, second quarter net earnings attributable to Lennar in 2022 were $1.4 billion, or $4.69 per diluted share, compared to second quarter net earnings attributable to Lennar in 2021 of $923.6 million, or $2.95 per diluted share.

Our net earnings attributable to Lennar were $1.5 billion, or $5.03 per diluted share ($5.04 per basic share), in the third quarter of 2022, compared to net earnings attributable to Lennar of $1.4 billion, or $4.52 per diluted share ($4.52 per basic share), in the third quarter of 2021.

Results included unrealized mark-to-market losses of $85.8 million, a $35.5 million one-time charge due to an increase in a litigation accrual related to a court judgment in the third quarter of 2022 and a $53.6 million benefit in income taxes primarily related to the resolution of an uncertain state tax position.

Results for the third quarter of 2021 included unrealized mark-to-market gains of $493.7 million on our publicly traded technology investments.

Excluding mark-to-market gains and losses on our publicly traded technology investments in both years and one-time items in the current year, the third quarter net earnings attributable to Lennar in 2022 were $1.5 billion, or $5.18 per diluted share, compared to the third quarter net earnings attributable to Lennar in 2021 of $1.0 billion, or $3.27 per diluted share.

Financial information relating to our operations was as follows:

Three Months Ended May 31, 2022

Three Months Ended August 31, 2022

(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total

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Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (14,652) — 20,864 (31,935) — (25,723)

Other income, net 2,720 — — — — 2,720

Homebuilding other expense, net (6,883) — — — — (6,883)

Lennar Other unrealized losses from technology investments — — — (85,839) — (85,839)

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Earnings (loss) before income taxes $ 1,963,224 63,348 48,487 (117,980) (132,805) 1,824,274

Three Months Ended May 31, 2021

Three Months Ended August 31, 2021

(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total

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Total costs and expenses 5,225,497 94,890 174,410 9,010 — 5,503,807

Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (1) (1,688) — 13,854 218,276 — 230,442

Other expense, net (4,362) — — — — (4,362)

Lennar Other unrealized losses from technology investments — — — (272,625) — (272,625)

Equity in earnings (loss) from unconsolidated entities, Multifamily other loss and Lennar Other other income (expense), net, and other gain (loss) 2,391 — (2,904) (689) — (1,202)

Homebuilding other expense, net (5,570) — — — — (5,570)

Lennar Other unrealized gains from technology investments — — — 493,671 — 493,671

Operating earnings (loss) $ 1,329,833 112,083 (9,393) 491,972 — 1,924,495

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Earnings (loss) before income taxes $ 1,329,833 112,083 (9,393) 491,972 (110,141) 1,814,354

(1) During the three months ended May 31, 2021, our Lennar Other segment realized a gain of $151.5 million on the sale of our residential solar business.

Six Months Ended May 31, 2022

Nine Months Ended August 31, 2022

(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total

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Equity in earnings (loss) from unconsolidated entities and Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (10,076) — 22,468 (68,493) — (56,101)

Other expense, net 2,549 — — — — 2,549

Homebuilding other expense, net (4,334) — — — — (4,334)

Lennar Other unrealized losses from technology investments — — — (558,974) — (558,974)

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Earnings (loss) before income taxes $ 4,953,485 258,074 54,582 (629,538) (380,760) 4,255,843

(1) During the six months ended May 31, 2022 , Other revenues in our Multifamily segment included land sales to unconsolidated entities of $147.8 million.

Six Months Ended May 31, 2021

Nine Months Ended August 31, 2021

(In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total

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Equity in earnings (loss) from unconsolidated entities and Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (1) (3,862) — 9,682 216,540 — 222,360

Other income, net 8,613 — — — 8,613

Lennar Other unrealized losses from technology investments — — — 197,120 — 197,120

Homebuilding other income, net 3,043 — — — 3,043

Lennar Other unrealized gains from technology investments — — — 690,791 — 690,791

Operating earnings $ 3,275,488 379,610 12,130 909,221 — 4,576,449

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Earnings (loss) before income taxes $ 3,275,488 379,610 12,130 909,221 (338,196) 4,238,253

(1) During the six months ended May 31, 2021, our Lennar Other segment realized a gain of $151.5 million on the sale of our residential solar business.

Three Months Ended May 31, 2022 versus Three Months Ended May 31, 2021

Revenues from home sales increased 33% in the second quarter of 2022 to $8.0 billion from $6.0 billion in the second quarter of 2021.

Revenues were higher primarily due to a 14% increase in the number of home deliveries to 16,549 homes from 14,493 homes and a 17% increase in the average sales price to $483,000 from $414,000.

Gross margin on home sales were $2.4 billion, or 29.5%, in the second quarter of 2022, compared to $1.6 billion, or 26.1%, in the second quarter of 2021.

During the second quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs.

(1) During the nine months ended August 31, 2021, our Lennar Other segment realized a gain of $153 million on the sale of our residential solar business.

Three Months Ended August 31, 2022 versus Three Months Ended August 31, 2021

Revenues from home sales increased 30% in the third quarter of 2022 to $8.4 billion from $6.5 billion in the third quarter of 2021.

Revenues were higher primarily due to a 13% increased in the number of home deliveries to 17,248 homes from 15,199 homes and a 15% increase in the average sales price to $491,000 from $428,000.

Gross margins on home sales were $2.5 billion, or 29.2%, in the third quarter of 2022, compared to $1.8 billion, or 27.3%, in the third quarter of 2021.

During the third quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margins improved year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Selling, general and administrative expenses were $486.6 million in the second quarter of 2022, compared to $455.2 million in the second quarter of 2021.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.1% in the second quarter of 2022, from 7.6% in the second quarter of 2021.

This was the lowest percentage for a second quarter in our history primarily due to a decrease in broker commissions and the benefits of our technology efforts.

Operating earnings for our Financial Services segment were $103.9 million in the second quarter of 2022, compared to $121.3 million in the second quarter of 2021.

The decrease in operating earnings was primarily due to lower mortgage net margins driven by a more competitive mortgage market, partially offset by an increase in rate lock volume and an increase in profit per order in our title business.

Operating earnings for our Multifamily segment were $0.7 million in the second quarter of 2022, compared to $22.4 million in the second quarter of 2021.

Operating loss for our Lennar Other segment was $108.4 million in the second quarter of 2022, compared to $54.1 million in the second quarter of 2021.

Lennar Other operating loss in the second quarter of 2022 was primarily due to mark-to-market losses on our publicly traded technology investments.

Lennar Other operating loss in the second quarter of 2021 was primarily due to mark-to-market losses on our publicly traded technology investments, partially offset by the gain on the sale of our residential solar business.

Six Months Ended May 31, 2022 versus Six Months Ended May 31, 2021

Revenues from home sales increased 26% in the six months ended May 31, 2022 to $13.7 billion from $10.9 billion in the six months ended May 31, 2021.

Selling, general and administrative expenses were $485.9 million in the third quarter of 2022, compared to $453.7 million in the third quarter of 2021.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 5.8% in the third quarter of 2022, from 7.0% in the third quarter of 2021.

This was the lowest percentage for any quarter in our history primarily due to a decrease in broker commissions and the benefits of our technology efforts.

Operating earnings for our Financial Services segment were $63.0 million in the third quarter of 2022.

The operating earnings included a $35.5 million one-time charge due to an increase in a litigation accrual related to a court judgment.

We are appealing this judgment since we believe there were clear errors of law made by the trial court.

Excluding this one-time charge, operating earnings were $98.5 million, compared to operating earnings of $111.9 million in the third quarter of 2021 .

The decrease in operating earnings was primarily due to lower mortgage net margins driven by a more competitive mortgage market, partially offset by an increase in rate lock volume.

Operating earnings for our Multifamily segment were $48.5 million ($45.9 million net of noncontrolling interests) in the third quarter of 2022, compared to an operating loss of $9.4 million in the third quarter of 2021.

Operating loss for our Lennar Other segment was $118.0 million in the third quarter of 2022, compared to operating earnings of $492.0 million in the third quarter of 2021.

Lennar Other operating loss in the third quarter of 2022 was primarily due to mark-to-market losses on our publicly traded technology investments.

Lennar Other operating earnings in the third quarter of 2021 were primarily due to mark-to-market gains on our publicly traded technology investments.

For the three months ended August 31, 2022 and 2021, the Company had a tax provision of $351.6 million and $405.1 million, respectively, which resulted in an overall effective income tax rate of 19.3% and 22.4%, respectively.

The overall effective income tax rate was lower in the third quarter of 2022 primarily due to the resolution of an uncertain state tax position

and the retroactive reinstatement of the energy efficient home credits for 2022, resulting from the passage of the Inflation Reduction Act by Congress.

Nine Months Ended August 31, 2022 versus Nine Months Ended August 31, 2021

Revenues from home sales increased 27% in the nine months ended August 31, 2022 to $22.1 billion from $17.4 billion in the nine months ended August 31, 2021.

Revenues were higher primarily due to a 10% increase in the number of home deliveries to 46,335 from 42,006 and a 16% increase in the average sales price to $479,000 from $414,000.

Gross margin on home sales were $3.9 billion, or 28.4%, in the six months ended May 31, 2022, compared to $2.8 billion, or 25.6%, in the six months ended May 31, 2021.

During the six months ended May 31, 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs.

Gross margins on home sales were $6.4 billion, or 28.7%, in the nine months ended August 31, 2022, compared to $4.6 billion, or 26.2%, in the nine months ended August 31, 2021.

During the nine months ended August 31, 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margins improved year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.

Selling, general and administrative expenses were $915.0 million in the six months ended May 31, 2022, compared to $865.4 million in the six months ended May 31, 2021.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.7% in the six months ended May 31, 2022, from 8.0% in the six months ended May 31, 2021.

Selling, general and administrative expenses were $1.4 billion in the nine months ended August 31, 2022, compared to $1.3 billion in the nine months ended August 31, 2021.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.3% in the nine months ended August 31, 2022, from 7.6% in the nine months ended August 31, 2021.

The improvement was primarily due to a decrease in broker commissions and the benefits of our technology efforts.

Operating earnings for our Financial Services segment were $194.7 million in the six months ended May 31, 2022, compared to $267.5 million in the six months ended May 31, 2021.

Operating earnings for our Financial Services segment were $257.1 million in the nine months ended August 31, 2022.

The operating earnings included a $35.5 million one-time charge due to an increase in a litigation accrual related to a court judgment.

Excluding this one-time charge, operating earnings were $292.6 million, compared to operating earnings of $379.3 million in the nine months ended August 31, 2021.

The decrease in operating earnings was primarily due to lower mortgage net margins driven by a more competitive mortgage market, partially offset by an increase in rate lock volume.

Operating earnings for our Multifamily segment were $6.1 million in the six months ended May 31, 2022, compared to $21.5 million in the six months ended May 31, 2021.

Operating loss for our Lennar Other segment was $511.6 million in the six months ended May 31, 2022, compared to operating earnings of $417.2 million in the six months ended May 31, 2021.

Lennar Other operating loss for the six months ended May 31, 2022 was primarily due to mark-to-market losses on our publicly traded technology investments.

Lennar Other operating earnings for the six months ended May 31, 2021 was primarily due to mark-to-market unrealized gains on our publicly traded technology investments and the gain on the sale of our residential solar business.

For the six months ended May 31, 2022 and 2021, we had a tax provision of $599.7 million and $570.2 million, respectively, which resulted in an overall effective income tax rate of 24.7% and 23.7%, respectively.

The overall effective income tax rate was higher in 2022 primarily due to the expiration of the new energy efficient home tax credit.

Operating earnings for our Multifamily segment were $54.6 million ($52.0 million net of noncontrolling interests) in the nine months ended August 31, 2022, compared to $12.1 million in the nine months ended August 31, 2021.

Operating loss for our Lennar Other segment was $629.5 million in the nine months ended August 31, 2022, compared to operating earnings of $909.2 million in the nine months ended August 31, 2021.

Lennar Other operating loss for the nine months ended August 31, 2022 was primarily due to mark-to-market losses on our publicly traded technology investments.

Lennar Other operating earnings for the nine months ended August 31, 2021 was primarily due to mark-to-market unrealized gains on our publicly traded technology investments and the gain on the sale of our residential solar business.

For the nine months ended August 31, 2022 and 2021, we had a tax provision of $951.3 million and $975.4 million, respectively, which resulted in an overall effective income tax rate of 22.4% and 23.1%, respectively.

The overall effective income tax rate was lower during the nine months ended August 31, 2022 primarily due to the resolution of an uncertain state tax position.

Homebuilding Segments

At May 31, 2022, our reportable Homebuilding segments and Homebuilding Other are outlined in Note 2 of the Notes to Condensed Consolidated Financial Statements.

At August 31, 2022, our reportable Homebuilding segments and Homebuilding Other are outlined in Note 2 of the Notes to Condensed Consolidated Financial Statements.

The following tables set forth selected financial and operational information related to our homebuilding operations for the periods indicated:

Selected Financial and Operational Data

Three Months Ended May 31, 2022

Three Months Ended August 31, 2022

Gross Margins Operating Earnings (Loss)

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$ 8,439,125 5,973,889 29.2 % 1,979,382 (2,597) 7,974 (14,652) (6,883) 1,963,224

Three Months Ended May 31, 2021

Three Months Ended August 31, 2021

Gross Margins Operating Earnings (Loss)

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$ 6,505,708 4,732,403 27.3 % 1,319,589 5,677 7,746 2,391 (5,570) 1,329,833

Six Months Ended May 31, 2022

Nine Months Ended August 31, 2022

Gross Margins Operating Earnings (Loss)

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$ 22,124,565 15,769,536 28.7 % 4,954,142 (7,477) 21,230 (10,076) (4,334) 4,953,485

Six Months Ended May 31, 2021

Nine Months Ended August 31, 2021

Gross Margins Operating Earnings (Loss)

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Average Sales Price

May 31, May 31, May 31,

August 31, August 31, August 31,

2022 2021 2022 2021 2022 2021

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Total 17,248 15,199 $ 8,456,358 6,510,763 $ 491,000 428,000

Of the total homes delivered listed above, 44 homes with a dollar value of $15.8 million and an average sales price of $358,000 represent home deliveries from unconsolidated entities for the three months ended May 31, 2022, compared to 31 home deliveries with a dollar value of $9.9 million and an average sales price of $319,000 for the three months ended May 31, 2021.

Six Months Ended

Of the total homes delivered listed above, 46 homes with a dollar value of $17.2 million and an average sales price of $375,000 represent home deliveries from unconsolidated entities for the three months ended August 31, 2022, compared to 15 home deliveries with a dollar value of $5.1 million and an average sales price of $337,000 for the three months ended August 31, 2021.

Nine Months Ended

Homes Dollar Value (In thousands)

Average Sales Price

May 31, May 31, May 31,

August 31, August 31, August 31,

2022 2021 2022 2021 2022 2021

5 unchanged sentences

Total 46,335 42,006 $ 22,166,936 17,396,003 $ 479,000 414,000

Of the total homes delivered listed above, 69 homes with a dollar value of $25.1 million and an average sales price of $364,000 represent home deliveries from unconsolidated entities for the six months ended May 31, 2022, compared to 43 home deliveries with a dollar value of $13.6 million and an average sales price of $316,000 for the six months ended May 31, 2021.

Of the total homes delivered listed above, 115 homes with a dollar value of $42.4 million and an average sales price of $368,000 represent home deliveries from unconsolidated entities for the nine months ended August 31, 2022, compared to 58 home deliveries with a dollar value of $18.7 million and an average sales price of $322,000 for the nine months ended August 31, 2021.

Sales Incentives (1):

Three Months Ended

Average Sales Incentives Per

Home Delivered Sales Incentives

as a % of Revenue

August 31, August 31,

2022 2021 2022 2021

East $ 8,300 8,700 1.8 % 2.3 %

Central 7,500 6,600 1.6 % 1.7 %

Texas 19,200 9,200 5.5 % 3.0 %

West 15,600 5,100 2.2 % 0.8 %

Other 86,900 121,000 8.7 % 10.5 %

Total $ 12,300 7,300 2.5 % 1.7 %

Nine Months Ended

Average Sales Incentives Per

Home Delivered Sales Incentives

as a % of Revenue

August 31, August 31,

2022 2021 2022 2021

East $ 7,000 11,900 1.6 % 3.3 %

Central 6,600 9,300 1.5 % 2.3 %

Texas 15,200 9,000 4.4 % 3.1 %

West 10,200 6,800 1.5 % 1.2 %

Other 93,500 124,600 9.1 % 11.4 %

Total $ 9,500 9,300 1.9 % 2.2 %

(1) Sales incentives relate to home deliveries during the period, excluding deliveries by unconsolidated entities.

New Orders (2):

2 unchanged sentences

Average Sales Price

May 31, May 31, May 31, May 31,

August 31, August 31, August 31, August 31,

2022 2021 2022 2021 2022 2021 2022 2021

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Total 1,189 1,196 14,366 16,277 $ 6,657,723 7,454,399 $ 463,000 458,000

Of the total homes listed above, 60 homes with a dollar value of $30.8 million and an average sales price of $514,000 represent homes in seven active communities from unconsolidated entities for the three months ended May 31, 2022, compared to 32 homes with a dollar value of $9.9 million and an average sales price of $373,000 in four active communities for the three months ended May 31, 2021.

Six Months Ended

Of the total homes listed above, 79 homes with a dollar value of $39.4 million and an average sales price of $499,000 represent homes in seven active communities from unconsolidated entities for the three months ended August 31, 2022, compared to 35 homes with a dollar value of $13.1 million and an average sales price of $375,000 in four active communities for the three months ended August 31, 2021.

Nine Months Ended

Homes Dollar Value (In thousands)

Average Sales Price

May 31, May 31, May 31,

August 31, August 31, August 31,

2022 2021 2022 2021 2022 2021

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Total 47,905 49,004 $ 23,553,531 21,561,062 $ 492,000 440,000

Of the total new orders listed above, 104 homes with a dollar value of $48.2 million and an average sales price of $463,000 represent new orders from unconsolidated entities for the six months ended May 31, 2022, compared to 67 new orders with a dollar value of $23.5 million and an average sales price of $351,000 for the six months ended May 31, 2021.

(1) Homes represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three and six months ended May 31, 2022 and 2021.

Of the total new orders listed above, 183 homes with a dollar value of $87.5 million and an average sales price of $478,000 represent new orders from unconsolidated entities for the nine months ended August 31, 2022, compared to 102 new orders with a dollar value of $36.7 million and an average sales price of $359,000 for the nine months ended August 31, 2021.

(2) Homes represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three and nine months ended August 31, 2022 and 2021.

We experienced cancellation rates in our Homebuilding segments and Homebuilding other as follows:

Three Months Ended Nine Months Ended

August 31, August 31,

2022 2021 2022 2021

East 12 % 7 % 9 % 8 %

Central 15 % 7 % 9 % 6 %

Texas 33 % 17 % 24 % 17 %

West 31 % 10 % 18 % 9 %

Other — % — % 50 % — %

Total 21 % 10 % 14 % 9 %

Homes Dollar Value (In thousands)

Average Sales Price

May 31, May 31, May 31,

August 31, August 31, August 31,

2022 2021 2022 2021 2022 2021

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Total 25,734 25,819 $ 12,887,422 11,978,030 $ 501,000 464,000

Of the total homes in backlog listed above, 114 homes with a backlog dollar value of $51.7 million and an average sales price of $453,000 represent the backlog from unconsolidated entities at May 31, 2022, compared to 62 homes with a backlog dollar value of $21.4 million and an average sales price of $345,000 at May 31, 2021.

During the six months ended May 31, 2022, we acquired 347 homes and 54 homes in backlog in the East and Central Homebuilding segment, respectively.

Of the total homes in backlog listed above, 147 homes with a backlog dollar value of $73.8 million and an average sales price of $502,000 represent the backlog from unconsolidated entities at August 31, 2022, compared to 82 homes with a backlog dollar value of $29.5 million and an average sales price of $359,000 at August 31, 2021.

During the nine months ended August 31, 2022, we acquired 340 homes and 53 homes in backlog in the East and Central Homebuilding segments, respectively.

Backlog represents the number of homes under sales contracts.

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We do not recognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.

Three Months Ended May 31, 2022 versus Three Months Ended May 31, 2021

Three Months Ended August 31, 2022 versus Three Months Ended August 31, 2021

Homebuilding East:

Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in New Jersey and an increase in the average sales price of homes delivered in all the states of the segment.

The increase in the number of home deliveries was primarily driven by an increase in the number of active communities.

The decrease in the number of home deliveries in New Jersey was primarily due to a decrease in the number of active communities due to the timing of opening and

closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

In the second quarter of 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher material and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat .

Revenues from home sales increased in the third quarter of 2022 compared to the third quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment and an increase in the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the third quarter of 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as the increase in the average sales price was more than the increase in land costs .

Homebuilding Central:

Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in North Carolina and Virginia, and an increase in the average sales price of homes delivered in all the states in the segment except in Georgia, Maryland and Tennessee.

The increase in the number of home deliveries was primarily driven by an increase in active communities.

The decrease in the number of home deliveries in North Carolina and Virginia was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

The decrease in the average sales price of homes delivered in Georgia, Maryland and Tennessee was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities.

In the second quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat.

Revenues from home sales increased in the third quarter of 2022 compared to the third quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in Georgia, Illinois and Maryland, and an increase in the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The decrease in the number of home deliveries in Georgia, Illinois and Maryland was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the third quarter of 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as the increase in the average sales price was more than the increase in land costs .

Homebuilding Texas:

Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries and an increase in the average sales price of homes delivered.

The increase in the number of home deliveries was primarily driven by an increase in deliveries per active community over the same period last year.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

In the second quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs.

Revenues from home sales increased in the third quarter of 2022 compared to the third quarter of 2021, primarily due to an increase in the number of home deliveries and an increase in the average sales price of homes delivered.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the third quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat .

Homebuilding West:

Revenues from home sales increased in the second quarter of 2022 compared to the second quarter of 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in Utah, and an increase in the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries was primarily driven by an increase in deliveries per active community over the same period last year.

The decrease in the number of home deliveries in Utah was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

In the second quarter of 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs.

Revenues from home sales increased in the third quarter of 2022 compared to the third quarter of 2021, primarily due to an increase in the average sales price of homes delivered in all the states in the segment which was offset by a slight decrease in the number of home deliveries in Arizona, California, Nevada and Utah.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The decrease in the number of home deliveries in Arizona, California, Nevada and Utah was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the third quarter of 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat.

Six Months Ended May 31, 2022 versus Six Months Ended May 31, 2021

Nine Months Ended August 31, 2022 versus Nine Months Ended August 31, 2021

Homebuilding East:

Revenues from home sales increased in the six months ended May 31, 2022 compared to the six months ended May 31, 2021, primarily due to an increase in the number of home deliveries and an increase the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries was primarily driven by an increase in the number of active communities.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

In the six months ended May 31, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher material and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat.

Revenues from home sales increased in the nine months ended August 31, 2022 compared to the nine months ended August 31, 2021, primarily due to an increase in the number of home deliveries and an increase in the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the nine months ended August 31, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as the increase in the average sales price was more than the increase in land costs .

Homebuilding Central:

Revenues from home sales increased in the six months ended May 31, 2022 compared to the six months ended May 31, 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in North Carolina and Virginia, and an increase in the average sales price of homes delivered in all the states of the segment except in Georgia and Tennessee.

The increase in the number of home deliveries was primarily driven by an increase in active communities.

Revenues from home sales increased in the nine months ended August 31, 2022 compared to the nine months ended August 31, 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in North Carolina and Virginia and an increase in the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per

active community.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

The decrease in the average sales price of homes delivered in Georgia and Tennessee was primarily driven by a change in product mix due to a higher percentage of deliveries in lower-priced communities.

In the six months ended May 31, 2022, an increase in revenues per square foot was less than offset by an increase in costs per square foot primarily due to higher material and labor costs.

Overall, gross margin percentage on home deliveries was slightly down year over year while land costs remained relatively flat.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the nine months ended August 31, 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat.

Homebuilding Texas:

The increase in the number of home deliveries was primarily driven by an increase in deliveries per active community over the same period last year.

The increase in the average sales price of homes delivered was primarily due

to favorable market conditions.

In the six months ended May 31, 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the nine months ended August 31, 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat.

Homebuilding West:

Revenues from home sales increased in the six months ended May 31, 2022 compared to the six months ended May 31, 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in Arizona, Nevada and Utah, and an increase in the average sales price of homes delivered in all the states in the segment.

Revenues from home sales increased in the nine months ended August 31, 2022 compared to the nine months ended August 31, 2021, primarily due to an increase in the number of home deliveries in all the states in the segment except in Arizona, Nevada and Utah, and an increase in the average sales price of homes delivered in all the states in the segment.

The increase in the number of home deliveries was primarily due to an increase in the number of deliveries per active community.

The decrease in the number of home deliveries in Arizona, Nevada and Utah was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.

The increase in the average sales price of homes delivered was primarily due to favorable market conditions.

In the six months ended May 31, 2022, an increase in revenues per square foot was offset by an increase in costs per square foot primarily due to higher material and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained relatively flat.

The increase in the average sales price of homes delivered was primarily due to price appreciation year over year.

In the nine months ended August 31, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.

Overall, gross margin percentage on home deliveries improved year over year as land costs remained flat.

Financial Services Segment

4 unchanged sentences

The following table sets forth selected financial and operational information related to the residential mortgage and title activities of our Financial Services segment:

Three Months Ended Six Months Ended

May 31, May 31,

Three Months Ended Nine Months Ended

August 31, August 31,

(Dollars in thousands) 2022 2021 2022 2021

3 unchanged sentences

Number of title and closing service transactions 17,500 16,900 48,500 49,000

At May 31, 2022 and November 30, 2021, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $155.8 million and $157.8 million, respectively.

At August 31, 2022 and November 30, 2021, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $151.0 million and $157.8 million, respectively.

Details of these securities and related debt are within Note 2 of the Notes to Condensed Consolidated Financial Statements.

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Balance Sheets

(In thousands) May 31, 2022 November 30, 2021

(In thousands) August 31, 2022 November 30, 2021

Multifamily investments in unconsolidated entities $ 631,513 654,029

Lennar's net investment in Multifamily 934,939 976,676

Statement of Operations Three Months Ended Six Months Ended

May 31, May 31,

Statement of Operations Three Months Ended Nine Months Ended

August 31, August 31,

(Dollars in thousands) 2022 2021 2022 2021

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Lennar Other primarily includes strategic investments in technology companies, primarily managed by our LEN X subsidiary, and fund interests we retained when we sold the Rialto Capital Management ( "Rialto") asset and investment management platform in 2018.

At May 31, 2022 and November 30, 2021, we had $1.0 billion and $1.5 billion, respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of $325.3 million and $346.3 million, respectively.

At August 31, 2022 and November 30, 2021, we had $917.7 million and $1.5 billion, respectively, of assets in our Lennar Other segment, which included investments in unconsolidated entities of $342.6 million and $346.3 million, respectively.

The investments in equity securities of Blend Labs, Inc.

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("Sonder"), and Sunnova Energy International, Inc.

("Sunnova") are held at market and will therefore change depending on the value of our share holdings in those entities on the last day of each quarter.

("Sunnova") are carried at market and will therefore change depending on the market value of our share holdings in those entities on the last day of each quarter.

The following is a detail of Lennar Other unrealized gains (losses) from technology investments:

Three Months Ended Six Months Ended

May 31, May 31,

Three Months Ended Nine Months Ended

August 31, August 31,

(In thousands) 2022 2021 2022 2021

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(2) Financial Condition and Capital Resources

At May 31, 2022, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $1.6 billion, compared to $3.0 billion at November 30, 2021 and $2.8 billion at May 31, 2021.

At August 31, 2022, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $1.6 billion, compared to $3.0 billion at November 30, 2021 and $2.8 billion at August 31, 2021.

We finance all of our activities, including homebuilding, financial services, multifamily, other and general operating needs, primarily with cash generated from our operations, debt issuances and cash borrowed under our warehouse lines of credit and our unsecured revolving credit facility (the "Credit Facility").

At May 31, 2022, we had $1.3 billion of homebuilding cash and cash equivalents and no outstanding borrowings under our $2.575 billion revolving credit facility, thereby providing $3.9 billion of available capacity.

At August 31, 2022, we had $1.3 billion of homebuilding cash and cash equivalents and no outstanding borrowings under our $2.575 billion revolving credit facility, thereby providing $3.9 billion of available capacity.

Operating Cash Flow Activities

During the six months ended May 31, 2022 and 2021, cash provided by operating activities totaled $53 million and $718 million, respectively.

During the six months ended May 31, 2022, cash provided by operating activities was impacted primarily by our net earnings, gross of Lennar Other mark-to-market loss on our publicly trade technology investments and other loss of $483 million, a decrease in loans held-for-sale of $336 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of $277 million and a decrease in receivables of $126 million primarily related to a decrease in Financial Services' receivables, net, which are loans sold to investors for which we have not been paid.

This was partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $3.1 billion.

During the six months ended May 31, 2021, cash provided by operating activities was impacted primarily by our net earnings, a decrease in loans held-for-sale of $444 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of $185 million, and a decrease in receivables of $118 million, partially offset by an increase in inventories due to strategic land purchases, and land development and construction costs of $1.6 billion.

During the nine months ended August 31, 2022 and 2021, cash provided by operating activities totaled $551.5 million and $1.3 billion, respectively.

During the nine months ended August 31, 2022, cash provided by operating activities was impacted primarily by our net earnings, excluding Lennar Other unrealized mark-to-market losses on our publicly traded technology investments and other gain (loss) totaling $578.7 million, a decrease in loans held-for-sale of $319.0 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of $180.9 million.

This was partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $3.9 billion and an increase in receivables of $164.4 million primarily related to an increase in Financial Services receivables, net, which are loans sold to investors for which we have not yet been paid.

During the nine months ended August 31, 2021, cash provided by operating activities was impacted primarily by our net earnings, net of Lennar Other unrealized mark-to-market gains on our publicly traded technology investments and other gain (loss) of $848.5 million primarily due to mark-to-market gains on strategic investments that went public during the nine months ended August 31, 2021, (Blend Labs, Hippo, Opendoor, SmartRent and Sunnova) and the sale of our solar business to Sunnova.

In addition there was a decrease in loans held-for-sale of $209.3 million primarily related to the sale of loans originated by our Financial Services segment, an increase in accounts payable and other liabilities of $514.0 million, and a decrease in receivables of $131.3 million, partially offset by an increase in inventories due to strategic land purchases, land development and construction costs of $2.3 billion.

Investing Cash Flow Activities

During the six months ended May 31, 2022 and 2021, cash used in investing activities totaled $65 million and $50 million, respectively.

During the six months ended May 31, 2022, our cash used in investing activities was primarily due to cash contributions of $261 million to unconsolidated entities, which included (1) $197 million to Homebuilding unconsolidated entities (2) $53 million to Lennar Other unconsolidated entities and (3) $11 million to Multifamily unconsolidated entities.

During the nine months ended August 31, 2022 and 2021, cash used in investing activities totaled $131.5 million and $131.2 million, respectively.

During the nine months ended August 31, 2022, our cash used in investing activities was primarily due to cash contributions of $396.7 million to unconsolidated entities, which included (1) $276.3 million to Homebuilding unconsolidated entities (2) $100.7 million to Lennar Other unconsolidated entities and (3) $19.8 million to Multifamily unconsolidated entities.

In addition, we had $93.8 million of purchases of investment securities related to strategic technology investments included in the Lennar Other segment.

This was partially offset by distributions of capital from unconsolidated entities of $331.8 million, which primarily included (1) $229.7 million from Multifamily unconsolidated entities, (2) $46.5 million from Homebuilding unconsolidated entities, and (3) $55.6 million from our Lennar Other unconsolidated entities.

During the six months ended May 31, 2021, our cash used in investing activities was primarily due to cash contributions of $282 million to unconsolidated entities, which included (1) $178.6 million to Homebuilding unconsolidated entities, (2) $57.8 million to Multifamily unconsolidated entities, and (3) $45.8 million to the strategic technology investments included in the Lennar Other segment.

During the nine months ended August 31, 2021, our cash used in investing activities was primarily due to cash contributions of $354.6 million to unconsolidated entities, which included (1) $164.0 million to Homebuilding unconsolidated entities, (2) $66.8 million to Multifamily unconsolidated entities, and (3) $123.8 million to the strategic technology investments included in the Lennar Other segment.

This was partially offset by distributions of capital from unconsolidated entities of $292.5 million, which primarily included (1) $159.3 million from Homebuilding unconsolidated entities, (2) $107.2 million from Multifamily unconsolidated entities, and (3) $26.0 million from the unconsolidated Rialto real estate funds included in our Lennar Other segment .

Financing Cash Flow Activities

During the six months ended May 31, 2022 and 2021, cash used in financing activities totaled $1.4 billion and $818 million, respectively.

During the six months ended May 31, 2022, cash used in financing activities was primarily due to (1) $404 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities;

During the nine months ended August 31, 2022 and 2021, cash used in financing activities totaled $1.8 billion and $1.3 billion, respectively.

During the nine months ended August 31, 2022, cash used in financing activities was primarily due to (1) the early redemption of $575 million aggregate principal amount of our 4.75% senior notes due November 2022, (2) $238.1 million of net repayments under our Financial Services' warehouse facilities;

(3) $918.7 million of repurchases of our common stock, which included $847.1 million of repurchases under our repurchase program and $71.6 million of repurchases related to our equity compensation plan;

1 unchanged sentence

These were partially offset by $327.8 million of net proceeds from liabilities related to consolidated inventory not owned due to activity with land banks.

During the six months ended May 31, 2021, cash used in financing activities was primarily impacted by (1) $535.7 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities;

During the nine months ended August 31, 2021, cash used in financing activities was primarily impacted by (1) $357.5 million of net repayments under our Financial Services' warehouse facilities, which included the LMF Commercial warehouse repurchase facilities;

(2) the redemption of $300 million aggregate principal amount of our senior notes;

(3) $234 million of dividend payments;

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Homebuilding debt to total capital and net Homebuilding debt to total capital are calculated as follows:

(Dollars in thousands) May 31, 2022 November 30, 2021 May 31, 2021

(Dollars in thousands) August 31, 2022 November 30, 2021 August 31, 2021

Homebuilding debt $ 4,057,496 4,652,338 5,542,513

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Rather, this non-GAAP financial measure should be used to supplement our GAAP results.

At May 31, 2022, Homebuilding debt to total capital was lower compared to November 30, 2021, primarily as a result of an increase in stockholders' equity due to net earnings, partially offset by share repurchases.

At May 31, 2022, Homebuilding debt to total capital was lower compared to May 31, 2021, primarily as a result of a decrease in Homebuilding debt due to debt pay downs and an increase in stockholders' equity due to net earnings, partially offset by share repurchases.

At August 31, 2022, Homebuilding debt to total capital was lower compared to both November 30, 2021 and August 31, 2021, primarily as a result of an increase in stockholders' equity due to net earnings and a decrease in homebuilding debt due to

debt paydowns, partially offset by share repurchases.

We are continually exploring various types of transactions to manage our leverage and liquidity positions, take advantage of market opportunities and increase our revenues and earnings.

These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit of other financing alternatives.

These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of

homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit of other financing alternatives.

In connection with some of our non-homebuilding businesses, we are also considering other types of transactions such as sales, restructurings, joint ventures, spin-offs or initial public offerings as we continue to move back towards being a pure play homebuilding company.

We have announced an intention to spin-off to our stockholders our asset management businesses (Lennar Multifamily and Lennar Single Family Rental) and some of our other non-core assets.

We expect the spin-off to take place by the end of 2022.

Our Homebuilding senior notes and other debts payable as well as letters of credit and surety bonds are summarized within Note 7 of the Notes to Condensed Consolidated Financial Statements.

Our Homebuilding average debt outstanding and the average rates of interest was as follows:

Six Months Ended

Nine Months Ended

(Dollars in thousands) 2022 2021

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Interest incurred $ 180,869 210,575

In May 2022, we amended the credit agreement governing our unsecured revolving credit facility (the “Credit Facility") to increase the commitment from $2.5 billion to $2.575 billion and extended the maturity to May 2027, except for $350 million which matures in April 2024.

In May 2022, we amended the credit agreement governing our unsecured revolving credit facility (the “Credit Facility") which increased the commitment from $2.5 billion to $2.575 billion and extended the maturity to May 2027, except for $350 million which matures in April 2024.

The Credit Facility has a $425 million accordion feature, subject to additional commitments, thus the maximum borrowings are $3.0 billion.

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These ratios are calculated per the Credit Facility agreement, which involves adjustments to GAAP financial measures.

We believe we were in compliance with our debt covenants as of May 31, 2022.

The following summarizes our debt covenant requirements and our actual levels or ratios with respect to those covenants as calculated per the Credit Facility agreement as of May 31, 2022:

We believe we were in compliance with our debt covenants as of August 31, 2022.

The following summarizes our debt covenant requirements and our actual levels or ratios with respect to those covenants as calculated per the Credit Facility agreement as of August 31, 2022:

(Dollars in thousands) Covenant Level Level Achieved as of

August 31, 2022

Minimum net worth test $ 11,649,110 16,539,387

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The repurchase authorization has no expiration date.

The details of our Class A and Class B common stock repurchases under the authorized repurchase programs for the three and six months ended May 31, 2022 and 2021 are included in Note 4 of the Notes to Condensed Consolidated Financial Statements.

During the six months ended May 31, 2022, treasury stock decreased due to our retirement of 46.7 million and 2.8 million treasury shares of Class A and Class B common stock, respectively, as authorized by our Board of Directors.

The details of our Class A and Class B common stock repurchases under the authorized repurchase programs for the three and nine months ended August 31, 2022 and 2021 are included in Note 4 of the Notes to Condensed Consolidated Financial Statements.

During the nine months ended August 31, 2022, treasury stock decreased due to our retirement of 46.7 million and 2.8 million treasury shares of Class A and Class B common stock, respectively, as authorized by our Board of Directors.

The retirement of Class A and Class B common stock in treasury resulted in a reclass between treasury shares and additional paid-in capital within stockholders' equity.

This decrease in treasury shares was partially offset by our repurchase of 8.2 million and 1.1 million shares of Class A and Class B common stock, respectively, through our stock repurchase program.

During the six months ended May 31, 2021, treasury shares increased due to our repurchase of 1.9 million shares of Class A and Class B common stock primarily due to our repurchase of 1.5 million shares of Class A and Class B common stock through our stock repurchase program.

On June 22, 2022, our Board of Directors declared a quarterly cash dividend of $0.375 per share on both our Class A and Class B common stock, payable on July 21, 2022 to holders of record at the close of business on July 7, 2022 .

On May 10, 2022, we paid cash dividends of $0.375 per share on both our Class A and Class B common stock to holders of record at the close of business on April 26, 2022, as declared by our Board of Directors on April 12, 2022.

We approved and paid cash dividends of $0.250 per share for each of the four quarters of 2021 on both its Class A and Class B common stock.

During the nine months ended August 31, 2022, this decrease in treasury shares was partially offset by our repurchase of 8.2 million and 1.1 million shares of Class A and Class B common stock, respectively, through our stock repurchase program.

During the nine months ended August 31, 2021, treasury shares increased due to our repurchase of 4.8 million shares of Class A and Class B common stock primarily due to our repurchase of 4.0 million shares of Class A and Class B common stock through our stock repurchase program.

On September 28, 2022, our Board of Directors declared a quarterly cash dividend of $0.375 per share on both our Class A and Class B common stock, payable on October 27, 2022 to holders of record at the close of business on October 13, 2022 .

On July 21, 2022, we paid cash dividends of $0.375 per share on both our Class A and Class B common stock to holders of record at the close of business on July 7, 2022, as declared by our Board of Directors on June 22, 2022.

We approved and paid cash dividends of $0.250 per share for each of the four quarters of 2021 on both our Class A and Class B common stock.

Based on our current financial condition and credit relationships, we believe that our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity.

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The indentures governing our senior notes require that, if any of our 100% owned subsidiaries, other than our finance company subsidiaries and foreign subsidiaries, directly or indirectly guarantee at least $75 million principal amount of debt of Lennar Corporation (other than senior notes), those subsidiaries must also guarantee Lennar Corporation’s obligations with regard to its senior notes.

Included in the following tables as part of “Obligors” together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at May 31, 2022 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 7 of the Notes to Condensed Consolidated Financial Statements.

Included in the following tables as part of “Obligors” together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at August 31, 2022 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 7 of the Notes to Condensed Consolidated Financial Statements.

The guarantees are full, unconditional and joint and several and the guarantor subsidiaries are 100% directly or indirectly owned by Lennar Corporation.

A subsidiary's guarantee of Lennar senior notes will be suspended at any time when it is not directly or indirectly guaranteeing at least $75 million principal amount of debt of Lennar Corporation (other than senior notes), and a subsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold or otherwise disposed.

Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at May 31, 2022 is included in the following tables.

Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at August 31, 2022 is included in the following tables.

Intercompany balances and transactions within the Obligors have been eliminated and amounts attributable to the Obligors' investment in consolidated subsidiaries that have not issued or guaranteed the senior notes have been excluded.

Amounts due from and transactions with nonobligor subsidiaries and related parties are separately disclosed:

(In thousands) May 31, 2022 November 30, 2021

(In thousands) August 31, 2022 November 30, 2021

Due from non-guarantor subsidiaries $ 16,424,764 4,187,044

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Total liabilities 9,573,612 9,631,796

Six Months Ended

(In thousands) May 31, 2022

Nine Months Ended

(In thousands) August 31, 2022

Total revenues $ 21,452,414

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Off-Balance Sheet Arrangements

We regularly monitor the results of both our Homebuilding, Multifamily and Lennar Other unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations.

We also monitor the performance of joint ventures in which we have investments on a regular basis to assess compliance with debt covenants.

For those joint ventures not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment.

We believe all of the joint ventures were in compliance with applicable debt covenants at August 31, 2022.

Homebuilding:

Investments in Unconsolidated Entities

As of May 31, 2022, we had equity investments in 47 active homebuilding and land unconsolidated entities (of which three had recourse debt, 14 had non-recourse debt and 30 had no debt) compared to 41 active homebuilding and land unconsolidated entities at November 30, 2021.

As of August 31, 2022, we had equity investments in 47 active homebuilding and land unconsolidated entities (of which 2 had recourse debt, 14 had non-recourse debt and 31 had no debt) compared to 41 active homebuilding and land unconsolidated entities at November 30, 2021.

Historically, we have invested in unconsolidated entities that acquired and developed land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homes for sale to third-party homebuyers.

Through these entities, we have primarily sought to reduce and share our risk by limiting the amount of our capital invested in land, while obtaining access to potential future homesites and allowing us to participate in strategic ventures.

The use of these entities also, in some instances, has enabled us to acquire land to which we could not otherwise obtain access, or could not obtain access on as favorable terms, without the participation of a strategic partner.

The use of these entities also, in some instances, has enabled us to acquire land to which we could not otherwise obtain access, or

could not obtain access on as favorable terms, without the participation of a strategic partner.

Participants in these joint ventures have been land owners/developers, other homebuilders and financial or strategic partners.

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Details regarding these investments, balances and debt are included in Note 3 of the Notes to Condensed Consolidated Financial Statements.

The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of May 31, 2022.

The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of August 31, 2022.

It does not represent estimates of future cash payments that will be made to reduce debt balances.

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Debt without recourse to Lennar $ 1,227,241 55,983 115,345 374,095 681,818 —

Land seller and other debt 13,508 — — — — 13,508

Land seller and other debt without recourse to Lennar 12,392 — — — 12,392 —

Maximum recourse debt exposure to Lennar 7,793 — — — 7,793 —

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Total $ 1,233,817 55,983 115,345 374,095 702,003 (13,609)

We own an approximately 40% interest in FivePoint Holdings, LLC., a NYSE listed company, and companies it manages, which own three large multi-use properties in California.

We manage, and have an investment in, Upward America Fund, which purchases single family homes and operates them as rental properties.

Investments in Unconsolidated Entities

At May 31, 2022, Multifamily had equity investments in 19 unconsolidated entities that are engaged in multifamily residential developments (of which 12 had non-recourse debt and 7 had no debt), compared to 17 unconsolidated entities at November 30, 2021.

At August 31, 2022, Multifamily had equity investments in 24 active unconsolidated entities that are engaged in multifamily residential developments (of which 14 had non-recourse debt and 10 had no debt), compared to 17 active unconsolidated entities at November 30, 2021.

We invest in unconsolidated entities that acquire and develop land to construct multifamily rental properties.

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Initially, we participated in building multifamily developments and selling them soon after they were completed.

Recently, however, we have been focused on developing properties with the intention of retaining them.

Participants in these joint ventures have been financial partners.

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The Multifamily segment includes LMV I, LMV II and a new Multifamily Fund, which are long-term multifamily development investment vehicles involved in the development, construction and property management of class-A multifamily assets.

Details of each as of and during the six months ended May 31, 2022 are included in Note 3 of the Notes to Condensed Consolidated Financial Statements.

We regularly monitor the results of both our Homebuilding and Multifamily unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations.

We also monitor the performance of joint ventures in which we have investments on a regular basis to assess compliance with debt covenants.

For those joint ventures not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment.

We believe all of the joint ventures were in compliance with applicable debt covenants at May 31, 2022.

The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of May 31, 2022.

Details of each as of and during the nine months ended August 31, 2022 are included in Note 3 of the Notes to Condensed Consolidated Financial Statements.

The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of August 31, 2022.

It does not represent estimates of future cash payments that will be made to reduce debt balances.

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We periodically receive advance distributions related to the carried interests in order to cover income tax obligations resulting from allocations of taxable income to the carried interests.

These distributions are not subject to clawbacks but will reduce future carried interest payments to which we become entitled from the applicable funds and have been recorded as revenues.

Our investment in the Rialto funds and investment vehicles totaled $200.1 million and $200.6 million as of May 31, 2022 and November 30, 2021, respectively.

As of May 31, 2022 and November 30, 2021, we had strategic technology investments in unconsolidated entities of $123.7 million and $145.6 million, respectively.

Our strategic technology investments through LEN X business help to enhance the homebuying and home ownership experience, and help us stay at the forefront of homebuilding innovation.

We own an approximately 40% interest in FivePoint Holdings, LLC., a NYSE listed company, and companies it manages, which own three large multi-use properties in California.

We manage, and have an investment in, Upward America Fund, which purchases single family homes and operates them as rental properties.

These distributions are not subject to clawbacks but reduce future carried interest payments to which we become entitled from the applicable funds and were recorded as revenues.

Our investment in the Rialto funds and investment vehicles totaled $193.8 million and $200.6 million as of August 31, 2022 and November 30, 2021, respectively.

As of August 31, 2022 and November 30, 2021, we had strategic technology investments in unconsolidated entities of $148.9 million and $145.6 million, respectively.

Our strategic technology investments through our LEN X business help to enhance the homebuying and home ownership experience, and help us stay at the forefront of homebuilding innovation.

Option Contracts

We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the options.

The table below indicates the number of homesites owned and homesites to which we had access through option contracts with third parties ("optioned") or unconsolidated JVs (i.e., controlled homesites):

Controlled Homesites Years of

May 31, 2022 Optioned JVs Total Owned Homesites Total Homesites Supply Owned (1)

The table below indicates the number of homesites owned and homesites to which we had access through option contracts with third parties ("optioned") and unconsolidated JVs (i.e., controlled homesites):

August 31, 2022 Controlled Homesites Owned Homesites Total Homesites Supply Owned (1)

East 104,754 53,093 157,847

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% of total homesites 63 % 37 %

Controlled Homesites Years of

May 31, 2021 Optioned JVs Total Owned Homesites Total Homesites Supply Owned (1)

August 31, 2021 Controlled Homesites Owned Homesites Total Homesites Supply Owned (1)

East 74,056 54,069 128,125

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Our contractual obligations and commercial commitments have not changed materially from those reported in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021.

There were no outstanding borrowings under our Credit Facility as of May 31, 2022.

There were no outstanding borrowings under our Credit Facility as of August 31, 2022.

(3) Recently Adopted Accounting Pronouncements

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(4) Critical Accounting Policies

We believe that there have been no significant changes to our critical accounting policies during the six months ended May 31, 2022 as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, for the year ended November 30, 2021.

While our critical accounting policies have not significantly changed during the six months ended May 31, 2022, the following provides additional disclosures about our revenue recognition accounting policy.

We believe that there have been no significant changes to our critical accounting policies during the nine months ended August 31, 2022 as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended November 30, 2021.

While our critical accounting policies have not significantly changed during the nine months ended August 31, 2022, the following provides additional disclosures about our revenue recognition accounting policy.

Revenue Recognition

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis